So you hear everyone raving about the success of their employee referral program, and you want one too. But how does it work?
Multinational companies have embraced the concept with enthusiasm and they’re raving about the results, but can it work for your organization?
An employee referral program can work for any company, from startups to big businesses. The main precursors to success are understanding what you want to achieve and proper planning. We’re going to share our top tips for crafting and implementing a referral program with you.
An effective employee referral program will see your cost per hire and time to hire on the decline and your employee retention rate on the incline. (According to Glassdoor, the average cost per hire is about $4,000 on and time to hire about 24 days.)
Success hinges on knowing what you want to achieve
Before we continue though we need to define an employee referral program. It can best be described as:
A program that encourages existing staff to recommend suitable candidates for current and future internal vacancies through an established and incentivized policy process.
The main aim is to engage your current workforce to actively contribute to the hiring pipeline to strengthen your recruitment process.
It’s important to remember that there can be no one size fits all referral program. Companies and industries differ, and people aren’t all alike.
What motivates one person to participate in a referral or rewards program might not motivate another. Companies that implement a successful employee referral program carefully consider what would motivate their employees and don’t assume what will get buy-in.
Now that you know what an employee referral program is, what do you want to achieve? Not every company will have the same goals in mind.
Ask yourself :
Are you looking to?
- Reduce hiring costs
- Improve time to hire
- Source new talent across skills
- Source only specialized skills
- Improve workforce diversity
- Grow your talent pool
- Fill vacancies immediately
- Increase headcount
- Expand nationally/globally
Advantages of employee referrals
LinkedIn data indicates that referrals strongly impact retention. Their research suggests that referred employees stay at a company for significantly longer than those sourced elsewhere.
The premise is that referred candidates are a better cultural fit because they already know about the company before they apply. Also, because they personally know the person who referred them, there’s a common thread regarding work ethic and expectations.
The same research also shows that referring employees tend to stay longer at a company than employees who don’t refer anyone. The most probable reason is that people who are engaged and happy at their workplace are more likely to recommend someone to the company than people who aren’t.
If bad hires have plagued you in the past, an employee referral program can solve your hidden problems ruining your quality of hires.
5 tips for creating an employee referral program your company will love
Once you’re clear on goals, you can start crafting your processes. Implementing an employee referral program shouldn’t be a knee-jerk reaction to something that sounds like a good idea.
You must spend time upfront analyzing your specific needs, the existing systems you have in place, and how you’ll get your staff to become actively involved.
1. Make it user-friendly
This is probably the most important tip of all. If your employee referral program is difficult to understand, has too many T’s & C’s and requires lots of effort, it won’t work. If recruiters have to put in a lot of effort to get the word out among staff, they’ll opt for job boards simply because recruiting is a hectic job.
If employees have to sit and figure out how to, or if they qualify, or if they should refer someone, they’ll drop the idea. Everyone has their own job with deadlines and deliverables. No one is going to put their work efficiency on the line to make a referral. Processes must be easy, guidelines must be clear, and feedback must be readily available.
2. Assign responsibility
Any program that’s run haphazardly will fail! There’s little value in crafting an employee referral program and assuming that it will run in the background. You have to assign responsibility to someone, preferably within HR, and let them run it from start to end.
You want someone who understands recruitment, your company culture, metrics and analytics and who’s good at marketing. Once you implement your internal referral program, it has to be marketed to your workforce regularly. You also want to know if the program is successful, so measuring progress and performance is essential. And, to keep employees engaged, you don’t want the program to become jaded. You want to boost it regularly with creative and novel ideas.
3. Use automation
To ensure everything runs smoothly for recruiters and employees, automate your employee referral program. There are plenty of excellent referral program software tools that will easily integrate with your ATS and meet the needs of your company.
Key features to consider are automated emails that can be shared on social media with a single click. Recruiters can write an email detailing the vacancy requirements and send it out to the entire workforce all at once. Employees who want to share can choose the platforms they want to use- and out it goes. That’s it!
You also want a software tool that automatically responds to staff who participated and gives them regular updates. For recruiters, the system must provide reports on which employees responded to the email, what candidates were referred and the right recruitment metrics to measure the success of your internal referral program.
4. Define the rewards clearly
This point ties in with making your employee rewards program user-friendly. Everyone onboard must know what the rewards are so that there’s no confusion or misunderstanding. If someone successfully recommends a candidate who gets employed and the reward is less than what they’d expected, it can lead to demotivation.
Rewards can be cash, extra leave days, shopping vouchers, holiday vouchers… whatever is within the company budget and what will appeal to your workforce. Each company has its own culture and corporate values, which attracts like-minded people. Know your workforce and what will appeal to them.
If your company places a lot of emphasis on social responsibility, your staff probably do too. You might want to afford them the option of donating all or part of their rewards to a charity or social cause of their choice. It would be great if the company can equal the donation to add to the feel-good sentiment.
Surprisingly, most people aren’t motivated by money. LinkedIn research found that most people are motivated by helping out:
- 35% of employees refer to help their friends.
- 32% of employees refer to help their company.
- 26% of employees do it to be seen as a valuable colleague.
- 6% of employees do it for money.
5. Give recognition
No matter what type of rewards you opt for, it’s vital that employees who make successful referrals are acknowledged and given credit within the organization. Whether you use internal communication tools, have regular company get-togethers or have formal staff meetings, show appreciation!
Name employees who made successful referrals and thank them for their contribution. Make it positive: make it company-wide. That keeps employees engaged and encourages others to get involved in the employee referral program.
Employee referral program ideas
Depending on the size of your company, there’s no limit to what type of program ideas you can implement. If you’re a global organization, you want to consider cultural differences when selecting the kind of rewards on offer.
Be sure to get international HR or branch managers involved before implementation so that your employee rewards program is a global success.
For smaller organizations, it’s actually easier because you know your workforce better.
Here are some ideas to consider:
- Gamification: this can be great in larger organizations who recruit regularly. Implement a points system and a leaderboard to encourage healthy competition. This can work particularly well in international companies and companies that have several national branches. This way, employees not only stay engaged but also get to know each other.
- Recruitment happy hours: organize employee get-togethers where they can bring along people who they’d like to refer. Have recruiters interact with the guests and chat about job opportunities that are available or future opportunities.
- Double rewards: the global skills shortage is no secret, and neither is the fact that many industries lack workplace diversity. You can offer double rewards to any employee who successfully refers a hard to find skill or adds to improve your diversity recruiting.
Successful employee referral examples
Learn from others. Here are three global companies who’ve discovered a winning formula.
- InMobi: when this global mobile advertising company was desperate to find engineering managers in India and the USA, their hiring team came up with a brilliant plan. They selected the Royal Enfield bike in India (comparable to a Harley Davison) and a Vespa in the US as a reward. To remind employees and keep them stoked, they parked the bikes at the entrance of each of their offices. For every successful referral, employees could choose between a brand new bike and a holiday trip to Bali. It worked! Their referral rate jumped from 20% to 50%.
- Google: to find the best talent, Google opted for a very straightforward approach that works very well. Recruiters interact with employees and ask them questions like “who’s the best developer you know?” Or “who’s the best finance person you’ve ever worked for?” Pointed questions get people thinking and referring.
- GoDaddy: great developers are hard to find, but they tend to stick together. This domain registrar and webhosting company came up with an innovative way to attract the very people they were looking to find. They put up a poster in code that read “if you know a coder in your network who can kicks ass, refer to GoDaddy recruiting.” Go figure; it worked! Who else would be able to read that poster other than great developers?